Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Z margins likely to fall under competitive pressure: analyst

Z Energy fuel margins likely to fall under competitive pressure, Deutsche report

May 9 (BusinessDesk) – Transport fuels distributor and retailer Z Energy’s success in raising margins on petrol and diesel sales is under pressure and are “likely to trend toward the industry’s lower net margin,” says Deutsche Bank analyst Grant Swanepoel in a research note on yesterday’s full year result from Z.

The Wellington-based company, which took over the refining, distribution and retail operations of Shell New Zealand in 2010 and listed on the NZX last year, reported earnings before interest, tax, depreciation and amortisation of $219 million for the year to March 31.

While that was ahead of last year’s prospectus forecast of $207 million, the apparent outperformance was “just a modest beat, or near top end of guidance”, once operational costs were adjusted for abnormal impacts, Swanepoel said.

Z reported fuel margins improved from 15.8 cents per litre to 17.1 cents per litre, ahead of a target 16.5 cents per litre, while accepting some loss of market share, which now sits 2 percent above where it was when Z was formed.

“Management indicated that it is now responding to the competitor discounting strategies, which it refers to as tactical discounting,” the Deutsche note says. “So far, while still early days, this has seen little change in competitive behaviour. A best outcome would be that competitors will stop the retail discounting.

“However, we expect that all it means is that Z’s margin at the pump will slowly trend toward the industry’s lower net margin.”

Deutsche maintained its ‘hold’ recommendation on Z, targeting a share price of between $4.08 and $4.11.

The company’s shares gained 1.8 percent to $3.90 in early trading on the NZX today, having initially fallen slightly to $3.87 after yesterday’s result announcement.

“The one metric that could cause a surprise on the upside over the 2015 financial year would be if the industry pushes the gross petrol margin, as reported by the Ministry of Business, Innovation and Employment, up another few cents per litre,” said Swanepoel’s note.

“We are forecasting just a 0.3 cents per litre rise over the year after a 2.6 cents per litre over the 2014 financial year.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Media: Julian Wilcox Leaves Māori TV

Māori Television has confirmed the resignation of Head of News and Production Julian Wilcox. Mr Maxwell acknowledged Mr Wilcox’s significant contribution to Māori Television since joining the organisation in 2004. More>>

ALSO:

Genetics: New Heat Tolerant Cow Developed

Hamilton, New Zealand-based Dairy Solutionz Ltd has led an expert genetics team to develop a new dairy cow breed conditioned to thrive in lower elevation tropical climates and achieve high milk production under heat stress. More>>

Fractals: Thousands More Business Cards Needed To Build Giant Sponge

New Zealand is taking part in a global event this weekend to build a Menger Sponge using 15 million business cards but local organisers say they are thousands of business cards short. More>>

Scoop Business: NZ Net Migration Rises To Annual Record In September

New Zealand’s annual net migration rose to a record in September, beating government forecasts, as the inflow was spurred by student arrivals from India and Kiwis returning home from Australia. More>>

ALSO:

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Auckland Outage: Power Mostly Restored Overnight

Vector wishes to advise that all but 324 customers have been restored overnight. These customers are spread throughout the network in small pockets. The main St Johns feeder was restored around midnight allowing most of the customers in all affected areas to have power this morning. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news